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– Job-replacement technology has directly boosted the income gap since the late 1980s, according to economists. (Article 3/3)
Courtesy MIT by Peter Dizikes: Modern technology affects different workers in different ways. In some white-collar jobs – designer, engineer – people become more productive with sophisticated software at their side. In other cases, forms of automation, from robots to telephone answering systems, have simply replaced factory workers, receptionists and many other types of employees.
Now, a new study co-authored by an MIT economist suggests that automation has a greater impact on the labor market and income inequality than previous research would indicate – and identifies 1987 as an essential turning point in that process, the moment when jobs lost to automation has ceased to be replaced by an equal number of similar opportunities in the workplace.
“Automation is critical to understanding the dynamics of inequality,” says MIT economist Daron Acemoglu, co-author of a recently published article detailing the findings.
In industries that adopt automation, the study shows that the average “displacement” (or job loss) of 1947-1987 was 17% of jobs, while the average “restoration” (new opportunities) was 19%. However, from 1987 to 2016, the displacement was 16%, while reintegration was only 10%. In short, these factory jobs or telephone answering jobs are not coming back.
“Many of the new job opportunities that technology brought from the 1960s to the 1980s have benefited low-skilled workers,” adds Acemoglu. “But since the 1980s, and especially in the 1990s and 2000s, there is a double blow for low-skilled workers: they are hampered by displacement and the new tasks to come are becoming slower and benefiting workers from high skill “.
The new article, “Unpacking the Skills Bias: Automation and New Tasks,” will be published in the May issue of the American Economic Association: Documents and Proceedings. The authors are Acemoglu, professor at the Institute at MIT, and Pascual Restrepo PhD ’16, assistant professor of economics at Boston University.
Low-skilled workers: going backwards
The new article is one of several studies that Acemoglu and Restrepo conducted recently, examining the effects of robots and automation in the workplace. In a recently published article, they concluded that, in the United States, from 1993 to 2007, each new robot replaced 3.3 jobs.
In another article, Acemoglu and Restrepo examined French industry from 2010 to 2015. They found that companies that quickly adopted robots became more productive and hired more workers, while their competitors stayed behind and laid off workers – with jobs again being generally reduced.
In the present study, Acemoglu and Restrepo build a model of the effects of technology on the labor market, while testing the strength of the model using empirical data from 44 relevant industries. (The study uses US Census statistics on employment and wages, as well as economic data from the Bureau of Economic Analysis and the Bureau of Labor Studies, among other sources.)
The result is an alternative to standard economic modeling in the field, which emphasized the idea of ”biased” technological change – meaning that technology tends to benefit some more skilled workers than less skilled workers, helping the wages of more skilled workers , while the value of other workers stagnates. Think again of highly trained engineers who use new software to complete more projects faster: they become more productive and valuable, while workers who have no synergy with new technologies are comparatively less valued.
However, Acemoglu and Restrepo think that even this scenario, with the difference in prosperity that it implies, is still benign. Where automation takes place, less skilled workers are not just failing to earn; they are actively pushed back financially. In addition, Acemoglu and Restrepo note that the standard model of biased change in skills does not fully explain this dynamic; estimates that productivity gains and real wages (adjusted for inflation) for workers are greater than they actually are.
More specifically, the standard model implies an estimate of about 2% annual productivity growth since 1963, while annual productivity gains were around 1.2%; it also estimates wage growth for low-skilled workers at around 1% per year, while real wages for low-skilled workers have fallen since the 1970s.
“Productivity growth has been weak and real wages have fallen,” says Acemoglu. “Automation is responsible for both.” In addition, he adds: “The demand for skills has dropped almost exclusively in sectors that have had a lot of automation”.
Why “technologies more or less” are so, so bad
In fact, says Acemoglu, automation is a special case within the larger set of technological changes in the workplace. According to him, automation “is different from technological change biased to the variety of gardens”, because it can replace jobs without adding much productivity to the economy.
Think of a self-checkout system in your supermarket or pharmacy: it reduces labor costs without making the task more efficient. The difference is that the job is done by you, not paid employees. These types of systems are what Acemoglu and Restrepo called “technologies more or less”, due to the minimum value they offer.
“The technologies are more or less not really doing a fantastic job, nobody is enthusiastic about individually analyzing their items at checkout, and nobody likes it when the airline they call puts them on automated menus,” says Acemoglu. “Technologies are more or less cost-saving devices for companies that only slightly reduce costs, but do not increase productivity much. They create the usual displacement effect, but they do not benefit other workers much, and companies have no reason to hire more workers or pay more to other workers. ”
Certainly, not all automation resembles self-checkout systems, which did not exist in 1987. At that time, automation consisted of more records of printed offices being converted into databases or machines being added to sectors such as textiles and furniture manufacturing. . Robots became more commonly added to heavy industrial manufacturing in the 1990s. Automation is a set of technologies, which continues today with software and AI, which are inherently worker shifts.
“Displacement is really the center of our theory,” says Acemoglu. “And it has darker implications, because wage inequality is associated with disturbing changes for workers. It is a much more playful explanation.
After all, the Luddites – British textile factory workers who destroyed machines in the 1810s – may be synonymous with technophobia, but their actions were motivated by economic concerns; they knew that machines were replacing their jobs. That same shift continues today, although, according to Acemoglu, the net negative consequences of technology on jobs are not inevitable. We could, perhaps, find more ways to produce technologies that improve employment, rather than innovations that replace employment.
“Not everything is disgrace and sadness,” says Acemoglu. “There is nothing to say that technology is bad for workers. It is the choice we make about the direction of developing technology that is critical. ”
Related article: Robots help some firms, even while workers across industries struggle